By Eric Jackson, Senior Contributor
01/19/11 - 06:00 AM EST
NEW YORK (TheStreet) -- AIG(AIG_) used to be a four-letter word.
No one liked American International Group as little as a year ago. It was the poster child for everything that went wrong before the financial crisis. Politicians and pundits assumed that the Federal Reserve's hasty rescue of the company --- to prevent a terrible crisis from spilling over into a catastrophic one -- would be a financial burden all taxpayers would carry for years, if not decades, to come.
The idea that AIG might one day be actually able to pay back the government was laughable.
Consider these facts:
- The Federal Reserve, with the help of the Treasury Department, had to step in to orchestrate a $182.3 billion bailout to keep AIG going;
- For this loan, AIG has been paying 14% interest to U.S. taxpayers;
- In exchange for the bailout, the government took preferred shares which give it effectively 92% control of the company.
Robert Benmosche was appointed the CEO of AIG on Aug. 3, 2009. He was immediately self-confident.
"The government might even make a little bit of money when we're done," he said at the time of his hiring.
Such a notion at the time seemed preposterous to many.
Financial blogger Barry Ritholz appeared on Yahoo! Finance's popular Tech Ticker on Aug 20, 2009, and called Benmosche's claims that AIG could one day repay all its loans to the government "totally absurd."
Benmosche has been a colorful CEO. He remained at his Croatian vacation home for the first few weeks on the job, even inviting reporters into his home and holding impromptu press conferences. Stories were written about the fact that his home had 12 bathrooms that were gold-plated. He talked about his vineyard. The image Benmosche projected wasn't one of a government bureaucrat living at below-market salary rates.
He immediately started holding internal town hall meetings with AIG employees, promising that the government wasn't going to bully them around anymore or get in the way of them running a great company. He promised to fight for employees to get the compensation they deserved. Stories also circulated about him pressing his own board for a better pay package for himself. Finally, AIG's board -- made up of people selected by the government -- told Benmosche to cool it. He stopped being so public, except for when he had to admit a few months ago that he was being treated for cancer and would leave the company when a proper successor could be chosen.
.......
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